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E-Cigarettes, Momentum To Legalize Marijuana Could Revive Tobacco Industry, According To The Boston Company Asset Management

NEW YORK and
LONDON,
April 16, 2014 /PRNewswire/ -- E-cigarettes and growing momentum to legalize marijuana in
the United States could dramatically revive growth for major tobacco companies, which have not introduced a major new product since light cigarettes in 1970, according to The Boston Company Asset Management (TBC), BNY Mellon's
Boston-based equity investment boutique.

The growing popularity of electronic nicotine-delivery systems (ENDS) has been increasing significantly over the last two years, according to
David M. Sealy, senior equity research analyst at TBC and the author of the report, Up in Smoke: Changes Sweep the Tobacco Industry.

While the ENDS industry initially was dominated by small entrepreneurial companies, TBC estimates that the largest three tobacco companies in the U.S. now hold approximately 25 percent of the global market.

"The global market for ENDS is substantial, and we estimate that it now amounts to
$3 billion in annual revenue, with roughly half in the U.S. and the other half in
Europe, primarily in the UK," said Sealy. "But this means that the ENDS market share is a mere 0.5 percent of the
$670 billion global cigarette industry."

Sealy added that he does not expect regulatory scrutiny to meaningfully slow the growth of e-cigarettes.

Regarding marijuana, Sealy said, "Legalization in the U.S. could be closer than most people think."

The TBC paper notes that the current marijuana policies as measured by consumption are a failure, with consumption growing consistently over the last 40 years. In addition, the costs of current policies including incarceration, enforcement, and loss of taxation are large and growing amid budget woes, the report said.

The report cites growing popular support for legalization and notes the trend for decriminalization in more states.